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Oppenheimer: Beneficiation in Africa
Feb 7, 2005 10:32 AM
By Full Speech
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De Beers strategy on Beneficiation in Africa
Speech by Nicky Oppenheimer, chairman De Beers Group to African Mining Ministers
February 6, 2005
Your Excellencies, Ministers, Honoured guests, Ladies and gentlemen
I am honoured to have this opportunity to address such an august body of Government and business representatives.
I have been asked to talk about De Beers’ strategy on Beneficiation in Africa. We in De Beers see this as a very wide ranging subject, for to us beneficiation starts the moment a De Beers geologist enters the field, and continues through to the process of polishing diamonds produced by De Beers’ mines. Beneficiation is part of the process of ensuring that not only are the diamonds produced by the mines ‘forever’ but that the benefits flowing from them are also ‘forever’ for the countries of their origin. Diamonds have played a pivotal role in many countries in our region. Those benefits have been of many different sorts and they are the answer to the challenge laid down by President Mbeki recently in Antwerp where he said ‘diamonds are said to be forever but how do we make them for Africa AND forever’.
De Beers was formed by Cecil Rhodes over 110 years ago in Kimberley, and at a stroke the greatest diamond mining company in the world was formed. A company whose influence ran all round the globe – at that time Africa’s greatest mining success story. There is no doubt that the employment practices of the then De Beers, in the late 19th and early 20th century, would be completely unacceptable today. But De Beers is a company that has always been ready to recognize its mistakes of the past and to ensure that they can never happen again.
From that early De Beers flowed economic development here in South Africa – the expertise and capital needed for the development of the gold mines in the Transvaal had their genesis in Kimberley, and exactly the same can be said of the infrastructure which identifies South Africa as the economic powerhouse in the region.
My grandfather became Chairman of De Beers in 1925 and one of the most important things he did was set down the criteria under which De Beers [and Anglo] would operate looking forward. As a tenet of faith he insisted that De Beers should make money but in a manner which made a real and important contribution the people, regions and countries where it operated. At a stroke, De Beers, in my view, was ahead of the mining field. This philosophy has been a fundamental part of De Beers dogma ever since.
This important aspect of De Beers could be seen as my father negotiated the purchase of the Williamson diamond mine in Tanzania. At the time of purchase my father understood the need for the country, then just emerging from a colonial past, to be involved in this important economic enterprise. He arranged to sell half of the mine to the emerging democratic government and for them to pay out of dividends generated by the mine. In this process he established a close friendship with Julius Nyrere. It is interesting to think that at a time when it was impossible for my father to get an appointment with South Africa’s Prime Minister, and when the Oppenheimers were being accused of being unpatriotic, racist and determined to destroy the fabric of the then apartheid regime, he could travel freely to Tanzania and would always stay with President Nyrere in State House where they could discuss the differing merits of Shakespeare’s plays! But De Beers’ involvement was not only one of friendship – we understood the need to up skill and train Tanzanians so they could take their place in driving the mine and the country forward. Tony Wilson, the then De Beers director responsible for mines, spent more time on this aspect than any other part of his De Beers’ responsibilities. Throughout the darkest days of the struggle against apartheid, in which Tanzania played an important role, South Africans from De Beers were welcome to visit the mine using their expertise for the benefit of the mine and the country. I have always seen this as a great compliment both to the perception of my father and the sort of company that was and is De Beers. The key was one of partnership between the Government and De Beers, a partnership in which both parties were aware and understanding of the others’ needs and goals.
The next Southern African country to attract De Beers was Botswana. Our geologist started looking for diamonds there in 1955 when the country was poor with no infrastructure. It took twelve years before Orapa was discovered when everything changed. Again De Beers was aware of the importance of this discovery to Botswana and so an agreement was reached that a joint company be formed, owned 50/50 between the Government of Botswana and De Beers, to be called Debswana. Soon thereafter the Letlhakane mine was discovered, and then Jwaneng. De Beers ensured that the very latest and most modern technology was brought to these mines to optimize their running. But De Beers and Debswana went further in the training and upgrading of local citizens so that they could take their place in the management of the company. Today both Orapa and Jwaneng’s General Managers are Botswana citizens whose training was facilitated by Debswana. In Botswana, mining leases last for 25 years and late last year the renewal of the Jwaneng lease was negotiated with the Government on mutually satisfactory terms. President Mogae has said that his Government and De Beers are like Siamese Twins, locked together, each benefiting from the other.
The polishing of diamonds is taking on increasing importance in Botswana, and De Beers is happy to be part of that process. As an early step it set up one of the first factories, which mirrors what happened many generations before in South Africa. We are currently, as part of the partnership, in discussion with the Government how to take this process forward in a constructive and sustainable manner. As previously in Tanzania, the partnership between De Beers and the Government has been the key to assuring that all possible beneficiation from diamonds in Botswana are realized
Looking round Botswana today it is easy to see that diamonds have been ‘forever’. The country has the fastest growing economy in our region with a solid and strong infrastructure on which future generations will be able to build. To my mind Debswana is a model of how Governments and private sector companies can and should co-operate. There is no doubt that together the sum of their parts is more than equal their individual worth. We in De Beers are particularly delighted that the Botswana Government is a 15% shareholder in De Beers – a sign of confidence in our company which is very much appreciated.
Namibia is another country where De Beers has operated for many years; indeed it was through purchasing the diamond deposits of the west coast from the custodian of enemy property after the First World War that my grandfather was able to gain control of De Beers. For many years in the apartheid era De Beers operated under the restrictive laws then in place. When independence came we knew that we had to sit down with the Government and find the best way forward for this mine. The outcome was for formation of Namdeb. The company recently celebrated the tenth anniversary of its formation in the presence of President Sam Nujoma and President elect Pohamba. Since the start of that partnership the mine has flourished and Inge Zaamwani, the Managing Director, is looking confidently to a future in which Namibia’s diamonds will play an important role in sustaining the economy for years to come. Namibia’s greatest diamond asset for the future lies under the sea, and De Beers has developed unique technology to enable Namdeb to mine this important resource. Again an important partnership has been established between De Beers and the Namibian Government, both of whom are determined that diamonds will create a ‘forever’ for Namibia. During 2005, our partnership will be taken another step forward as we negotiate the renewal of our sales agreement. As part of this process I am sure we will be discussing all aspects of the diamond business, including cutting and polishing,
Back in South Africa, De Beers continued to be the major producer of diamonds. But under the apartheid Governments that vital element of partnership, as seen in the rest of Southern Africa, was sadly missing. The then Governments viewed De Beers and the Oppenheimers as subversive and dangerous, and were all too ready to pass bad legislation to try and ‘get’ us. The apartheid laws passed by those Governments made it hard to be as progressive as we would have wanted, though with the benefit of hindsight it is clear we were not as proactive as we should have been. However, I believe in the then environment De Beers and Anglo were ahead of their competitors particularly in the educational field which looks to the future. For De Beers, the release of Nelson Mandela and then the first democratic election here, gave us the opportunity to establish the virtuous circle of partnership and consultation with my Government, and the present Minister has greatly contributed to that process.
South Africa, as the oldest diamond producer in the region, was the first to look for the establishment of a diamond cutting and polishing industry. Soon after my grandfather became Chairman of De Beers he set about starting the industry. In 1928 De Beers undertook, at its cost, the erection of a diamond cutting factory in Kimberley. Sadly the great depression followed closely behind this initiative and the factory closed in 1933, but a start had been made and De Beers had been part of the process. Subsequent Governments encouraged the industry to start up again and were prepared to subsidize the industry, sadly without a clear understanding of the costs involved. For example in the late 1980s the then South African Government started down a policy of encouraging the decentralization of industry by offering incentives. With this encouragement the number of people employed in the polishing and cutting industry more than doubled to some 4,500 people. But as soon as the incentive was removed the number employed immediately fell back to around the 2,000 level.
However, over time South Africa has been able to establish a core viable cutting and polishing industry which can now stand on its own feet. But the industry cannot polish all South Africa’s production – at its simplest it cost between US$40 and US$50 to polish a carat of rough diamond here while the equivalent cost in India is between US$10 and US$12. This means that only larger, better quality diamonds can be polished in South Africa. All diamonds than can be economically cut in South Africa are offered to the South African industry. De Beers plays a constructive part of this process and currently supplies, in value terms, more than the South African production of these sizes and qualities to its clients here in South Africa. As we look forward, the industry needs to transform itself to fit into the new South Africa, and once again De Beers is committed to do all it can to help this process in consultation with the Government.
The moral of this story is that under my definition of beneficiation, diamonds have played key roles in our region. We are now looking to the future to see what more can be done to ensure that the benefits to the producing countries continue to be ‘forever’. De Beers is a key player in the Southern Africa region and proud of our achievements. To my mind the key is the partnership between Government and De Beers in the different countries of the region. Together we can achieve much and can do even more in the future. The possible tragic results if this partnership should fail can be seen in a country like Sierra Leone. Sierra Leone was once one of the most important diamond producers in the world, but weak and corrupt Government have led to diamonds not being ‘forever’ and being associated with war and conflict.
Partnerships between Governments and the private sector are not always easy as they are very different animals with different shareholders and different ambitions. The partnership needs to be open and transparent, with either side listening carefully to the other and doing their best to understand one another. In South Africa, the new Minerals Act together with its Charter, forces this interaction which I much applaud. In this process the Government is always the senior partner and carries the largest knobkerrie, but it is a stick that needs to be used very infrequently. The mining companies know it is there and will act accordingly, but frequent clubbing will lead to disengagement which will be in neither interest.
If I may be so bold I would like to make a suggestion to you here today. The Governments of the region should adopt my grandfather’s dictum. They should insist that any mining enterprise must be run in a way that makes a real and ‘forever’ contribution to the countries where they hope to operate. In the diamond industry that will include looking at every aspect of their business from prospecting, to mining, the cutting and polishing to see that they are doing all in their power to assure that the benefits last forever – I am proud that De Beers passes this test.
N F OPPENHEIMER
CHAIRMAN
DE BEERS
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Tags:
De Beers, Debswana, Economy, Government, India, Mining Companies, Namdeb, Namibia, Polishing, Production, South Africa
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